Strategic Choice of Privatization and its Impact on Firm Performance: Case of Vietnam

This dissertation investigates the Vietnamese government's systematic approach to equitization, a form of partial privatization, of state-owned enterprises (SOEs) between 2002 and 2017 and examines its dynamic impacts on firm performance. Using a multinomial probit model on comprehensive firm-level data, I reveal the government's persistent preference for equitizing small-/medium-sized SOEs in non-primary industrial sectors, characterized by high labor intensity and low labor costs, while profitability is not a significant factor in equitization decisions. Government motivations, such as political benefit objective and debt restructuring priorities, evolved over time, and also showed varied preferences across key economic regions. Employing an intertemporal dynamic firm model that nests political and profit-maximization objectives, and utilizing a two-stage residual inclusion (2SRI) framework with local projection methods, I further trace the nonlinear dynamic effects of equitization on firm performance from 2010 to 2017. Results show a non-linear adjustment: equitization leads to a persistent and increasingly large decline in the labor cost share of production revenue, consistent with equitized firms gradually shifting their decision-making toward profit maximization by reducing political pressure on employment, while capital/labor composition and profitability do not exhibit statistically significant changes once firm characteristics and government selection into equitization are taken into account.